R&D INVESTMENT DECISION ON EMERGING TECHNOLOGY

Guang-Jun Deng () and Yong Zeng ()
Additional contact information
Guang-Jun Deng: School of Management and Economics, The University of Electronic Science and Technology of China, No. 4, Section 2, North Jianshe Road, Chengdu, Sichuan 610054, P. R. China
Yong Zeng: School of Management and Economics, The University of Electronic Science and Technology of China, No. 4, Section 2, North Jianshe Road, Chengdu, Sichuan 610054, P. R. China

International Journal of Information Technology & Decision Making (IJITDM), 2011, vol. 10, issue 03, 451-477

Abstract: The prosperity of emerging technology may be triggered by the occurrence of rare events, and once emerging technology booms, there may be an enormous market demand for it. This paper explores the firm's commercial and R&D investment decisions on emerging technology in real options framework. We think that, for the fear that a rare event which occurs prior to R&D success would trigger the emerging technology boom, the firm should carry out prospective R&D in the emerging technology innovation. So the impacts of the R&D hazard rate and the intensity of rare event arrival on the prospective R&D investment strategy are mainly addressed. There are two results. First, the firm is most likely to take the strategy at low, rather than high, probability of technological boom in market-driven innovation. Second, in technology-driven innovation, the huge potential profit of emerging technology in booming period can arouse more attention toward the firm. When the growth rate of profit flow in booming period rises to some degree, the firm may take this strategy unconditionally.

Keywords: Emerging technology; R&D; market-driven innovation; technology-driven innovation; real options; investment decision; 22E46; 53C35; 57S20 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219622011004403
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:ijitdm:v:10:y:2011:i:03:n:s0219622011004403

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219622011004403

Access Statistics for this article

International Journal of Information Technology & Decision Making (IJITDM) is currently edited by Yong Shi

More articles in International Journal of Information Technology & Decision Making (IJITDM) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().